Case Studies

Epstein Becker Green Wins Dismissal of Servers’ Wage and Tip Claims Against Restaurant

On January 14, 2011, Epstein Becker Green helped one of its restaurant clients, the Brasserie Ruhlmann, obtain summary judgment "in its entirety" in a lawsuit brought by former waiters, bussers, and runners ("Plaintiffs"). Similar to many such wage and hour cases currently being litigated in the hospitality industry, Plaintiffs sought to invalidate the restaurant's tip pool with assertions that captains and the banquet coordinator performed managerial functions and, thus, were not "tip eligible." If Plaintiffs had succeeded, they would have also invalidated the restaurant's "tip credit" system of compensating service employees, potentially resulting in significant minimum wage and overtime liability. Plaintiffs made further claims for tips during their initial training period, alleged "spread of hours" violations, and alleged uniform maintenance violations.

In a sweeping 17-page Memorandum Opinion and Order, Judge Swain of the U.S. District Court, Southern District of New York, found, among other things, that "captains and banquet coordinators had regular interactions with customers in connection with core restaurant functions." Accordingly, the Court held that the restaurant had properly treated the plaintiffs as tip eligible. After careful scrutiny, the restaurant's wage and hour practices were completely vindicated by the Court. Garcia v. La Revise Assocs. LLC, 08 cv 9356 (SDNY 2011).

Epstein Becker Green developed a strategy to elicit admissions from the Plaintiffs in discovery that, together with declarations and selected documents, provided the basis for Judge Swain's decision. This case resulted in a total victory for the restaurant and is the first reported decision to hold that the position of banquet coordinator was tip eligible.

This win was achieved by Epstein Becker Green's Labor and Employment Hospitality and Wage and Hour practice groups and, particularly, attorneys Douglas Weiner and Dean L. Silverberg.

Epstein Becker Green Wins Dismissal of Service Personnel’s Tip Pool Claims Against Restaurant

Epstein Becker Green obtained summary judgment, on behalf of a restaurant client ("Restaurant"), from Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia. See Arencibia v. 2401 Restaurant Corporation d/b/a Marcel's Restaurant, No 1:09-cv-00165-CKK-DAR (D.D.C. Dec. 21, 2011). The plaintiffs, several service personnel, had brought a multifaceted challenge under both the FLSA and District of Columbia law to the method by which the Restaurant operated a tip pool.

In a 31-page decision, Judge Kollar-Kotelly made several significant findings:

  • The maître d' was not a manager and, therefore, properly participated in the tip pool; what controlled was his actual authority, not what the employees may have perceived his authority to be. Accordingly, the Court found that two possible instances where the maître d' allegedly terminated or disciplined an employee were irrelevant.
  • The fact that a director of sales received a commission from part of a service charge, the rest of which went to a tip pool, did not make her a participant in the tip pool. Alternatively, the Court found that she had sufficient interaction with customers in arranging and planning private parties to be included in the tip pool, even though she did not serve food or perform hosting duties.
  • Allegations of improper notice of, and arbitrary modifications to, the operation of the tip pool were rejected by the Court. By doing so, the Court, in what appears to be a matter of first impression, held that the Department of Labor's tip pool regulations do not require any particular percentage method, or preclude adjustments based on good performance or customer-directed tips. Therefore, it was sufficient that the restaurant simply notified the employees that all their non-cash tips went into the tip pool and did not retain any of the tips for any other purpose. Neither federal nor District of Columbia law required disclosure of the formula underlying the dispersal of tips in the pool.
  • A claim that one of the plaintiffs was terminated for making complaints about the operation of the tip pool was rejected by the Court. In so doing, the Court held that a request for a meal break or on premises meal did not raise a compensation issue protected under the FLSA.

The Epstein Becker Green team representing the Restaurant included Frank C. Morris, Jr.; Brian Steinbach; and Kathleen M. Williams of the Washington, D.C., office.

Epstein Becker Green Persuades California Court to Deny Certification of Misclassification, Meal Period, and Rest Period Claims Against Restaurant Client

After more than five years of litigation, a Los Angeles Superior Court has denied a motion for certification of a class action against Epstein Becker Green client Joe's Crab Shack Restaurants on claims that its managers were misclassified as exempt and denied meal and rest periods in violation of California law. The Epstein Becker Green team, which was led by Michael S. Kun, argued on behalf of the defendant that the plaintiffs' claims could not be certified for class treatment because, among other things, individualized inquiries would need to be conducted because managers' experiences differ from restaurant to restaurant, position to position, and day to day.

In denying the plaintiffs' class certification motion, Judge Charles Palmer found that the plaintiffs had not established adequacy of class representatives, typicality, commonality, or superiority. In addition, Judge Palmer noted that handling this case as a class action would require every individual member to prove whether or not he or she spent more than half his or her time on exempt managerial tasks, which would be time-consuming and burdensome for the court. This ruling also emphasized a defendant's due process right to provide individualized defenses to class members' claims.

Defeating Discrimination and Retaliation Claims Against Restaurant Operator

Epstein Becker Green recently helped a client that operates restaurants around the country achieve a victory against a discrimination and retaliation complaint filed with the New York State Division of Human Rights (“NYSDHR”).

After receiving a probable cause determination pursuant to an NYSDHR investigation, our client was determined to be vindicated at the hearing of this matter. And that is precisely what Epstein Becker Green helped the client achieve.

The complainant, a former restaurant server, brought sex, age, and disability-based discrimination claims, as well as a retaliation claim, against two of our client’s restaurants. Over the course of a four-day hearing, Epstein Becker Green attorneys elicited testimony from seven witnesses from both restaurants at which the complainant worked during her employment. The complainant’s case consisted of three witnesses (one of whom has a separate pending complaint against one of our client’s restaurants for sexual harassment and wrongful termination). This administrative forum was quite challenging for our client in that it permitted the admission of “hearsay evidence” (i.e., secondhand testimony), which the complainant attempted to use to her advantage.

Nevertheless, five months after the parties’ submission of lengthy post-trial briefing, the administrative law judge (“ALJ”) for the NYSDHR ruled completely in our client’s favor, dismissing all counts of the complaint. (It is also interesting to note that Epstein Becker Green made several procedural arguments, including a successful statute of limitations defense pursuant to which the ALJ dismissed one of the complainant’s discrimination-based claims as time-barred. Our attorneys were able to accomplish this result through pre-hearing in limine motions and oral argument.)

The Epstein Becker Green team responsible for this victory included Jeffrey H. Ruzal and Carly Baratt.

Securing Complete Vindication in WHD Investigation of Hotel Client’s Pay Practices

Epstein Becker Green recently achieved a significant and favorable result for a hotel client. Within days of our client temporarily closing its hotel in the Midwest due to COVID-19, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) notified our client that it was commencing an investigation of the closed hotel’s pay practices. Paul DeCamp (who used to run the WHD) worked with the investigator to narrow substantially the information our client needed to produce, while taking steps to guard against the scope of the investigation broadening to reach any of our client’s more than two dozen other domestic properties. After reviewing time and pay records for hundreds of workers, the WHD wrapped up the investigation in under two months, concluding that our client owed nothing in back wages or penalties.

An investigation at a hospitality establishment resulting in a finding of no minimum wage or overtime violations is exceedingly rare. For an industry already under tremendous pressure due to near-total business disruption caused by COVID-19, investigations such as this one cannot come at a worse time. However, achieving a complete vindication in our case in spite of the challenges created by the pandemic made the outcome all the more satisfying for our client and Epstein Becker Green.